Welcome to this week’s Property News.
The 2020 Federal Budget is clearly focused on getting Australians back to work and spending again with incentives for employers to hire new staff and with broad based tax cuts to lift consumer demand. For the property sector, the news is good, but many policy issues remain untouched.
The extension of the First Home Loan Deposit Scheme, with a specific focus on new homes, was one the Governments key messages for property industry – particularly for House & Land developers. Under that scheme, eligible first-home buyers will only need a 5% deposit instead of the 20% needed to avoid lenders’ mortgage insurance, with the federal government guaranteeing up to 15% of the loan.
The Federal Government also provided an additional $1 billion through the National Housing Finance and Investment Corporation to support the construction of affordable housing which will predominantly help the not for profit Community Housing Providers and the construction industry.
The other indirect benefits to the property industry are the $50bn of personal and business tax cuts and employment incentives together with a further $7.5bn in infrastructure spending.
The budget and the previous COVID assistance measures will take the budget deficit this financial year to 11% of GDP, the largest peacetime budget deficit in history, and the total debt to GDP is expected to increase to 55%.
Other tax reforms such as working with the States to abolish stamp duty or concessions for Built to Rent projects remain off the table for now.
If you are a charts person, here are 10 charts from EY that tell the budget story. Link
All of the above measures are great and will provide the means to get businesses and consumers up and running, however I don’t expect the budget to overcome the near term downside risks in reduced office demand and is unlikely to shift the tide for major retail shopping centres.
Time is running out on your local David Jones, Myer, Target & Big W stores and the holes they create will be significant issues for major shopping centre owners.
I continue to favour property underpinned by long term secure tenants who target non discretionary consumer expenditure – neighbourhood convenience retail, medical & health, education and child care services, fuel & automotive services.
Until next week.
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